Glencore woes cast shadow over coal M&A – by Sarah McFarlane (Reuters U.S. – October 20, 2015)

BARCELONA – Oct 20 Glencore’s efforts to reduce debts to turn around its share price will limit its ability to do deals on coal assets and its absence is expected to slow consolidation in the depressed sector.

As the largest shipper of thermal coal, Glencore has been omnipresent in deals concerning assets in the sector, where a glut of supply has sent prices to multi-year lows, prompting expectations for a wave of consolidation among miners.

This changed in September, however, when Glencore succumbed to shareholder pressure and announced plans to reduce its debt to $20 billion from the current $30 billion, including a share issue and asset sales.

“Glencore, if they had been financially powerful, would have accelerated the consolidation of the thermal coal industry,” a trader at a mining company said.

Glencore declined to comment on its ability to make acquisitions.

The mining and trading company’s overhaul is expected to tie its hands on even the most attractive of deals, shrinking the pool of potential buyers of coal assets, which was already suffering from a withdrawal of investors conscious of the environmental impact of coal power.

“At the moment they’re (Glencore) focused on sorting out their own house. It’s good news for anyone else who is a buyer, it’s one less significant natural buyer in the market,” Neil Passmore, chief executive of corporate finance advisory firm Hannam & Partners, said on the sidelines of the Coaltrans world coal conference in Barcelona.

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